Company is considering purchasing a breadmaker. The cost of the breadmaker is $200,000 and an additional $10,000 is required for installation and training expenses. The old equipment can be sold for $4000. Annual cash flows are $6,285 It is estimated the breadmaker will operate for 25 years Annual costs are expected to consist of $2500 for maintenance, 8,200 for depreciation, and 4,000 for electricity. The rate of return is 6%. The companies corporate tax rate is 25% and the present value of the tax shield for the breadmaker is $28000 Given all of this information, what would be the NPV of the breadmaker and should the company purchase it?
Company is considering purchasing a breadmaker. The cost of the breadmaker is $200,000 and an additional $10,000 is required for installation and training expenses. The old equipment can be sold for $4000. Annual cash flows are $6,285 It is estimated the breadmaker will operate for 25 years Annual costs are expected to consist of $2500 for maintenance, 8,200 for depreciation, and 4,000 for electricity. The rate of return is 6%. The companies corporate tax rate is 25% and the present value of the tax shield for the breadmaker is $28000 Given all of this information, what would be the NPV of the breadmaker and should the company purchase it?
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 10P
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Company is considering purchasing a breadmaker. The cost of the breadmaker is $200,000 and an additional $10,000 is required for installation and training expenses. The old equipment can be sold for $4000.
Annual cash flows are $6,285 It is estimated the breadmaker will operate for 25 years
Annual costs are expected to consist of $2500 for maintenance, 8,200 for depreciation , and 4,000 for electricity.
The rate of return is 6%. The companies corporate tax rate is 25% and the present value of the tax shield for the breadmaker is $28000
Given all of this information, what would be the NPV of the breadmaker and should the company purchase it?
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